Electoral watchdog gets tough on loans

Electoral Commission asks for proof that party loans were on a commercial basis

Wednesday, 29, Mar 2006 12:00

The Electoral Commission has demanded details of all loans given to political parties to prove they have "nothing to hide".

In a statement, the watchdog said public confidence in the democratic process had been "damaged" by recent revelations about major Labour contributors being given peerages.

The intervention comes just hours after the commission received assurances from all the main political parties that they had declared all their funding sources required under law.

Unlike political donations, loans to parties do not need to be declared to the commission, and therefore made public, as long as they are made on commercial terms.

But today the commission said questions still remained and announced that political parties should publish details of all the loans they have received in the past.

"Although we are aware that parties have taken the view that past loans were on commercial terms, reports recently quoting both lenders and party representatives have raised doubts over whether parties were right to regard them in this way," it said.

The statement added: "In our view, questions remain about whether these previous loans were made on commercial terms, and therefore whether parties are right to maintain that no element of them should have been reported as a donation."

As a result, the Electoral Commission will be calling on party treasurers to explain and prove with documents how they concluded that loans were made on commercial terms.

If the parties fail to comply, the watchdog warned it has a legal power under the Political Parties, Elections and Referendums Act 2000 to force them to produce financial records.

"If necessary, we would be prepared to exercise these powers to obtain the information we require to judge whether a political party has fully complied with the law," the commission said.

Today's announcement comes after it was revealed that Scotland Yard's investigation into the so-called loans for peerages scandal may include corruption charges.

It is alleged that some Labour donors enjoyed benefits such as government contracts, something the party emphatically denies.